Hyperion Planning

The Challenges of Hyperion Support - Part 3: Managing the Process and Workflow of the Finance Office

The Bean Consulting Group

Introduction

Now that we have covered Metadata Management and Smart View User Support, we have covered what might be considered the two ends of the Hyperion support “spectrum”.  There is, of course, the Data Integration aspect which “connects” the two ends of the spectrum, and which we will cover in Part 4 of the series – Data Integration, Ownership and Security.  However, before we discuss data integration, let’s spend a little more time on the “how and why” of a Hyperion user’s interaction with the system and applications - an interaction that is about processes and controls.

In order to understand the Hyperion user’s interaction, we should also try to understand the perspective of the user; this means recognizing or remembering that the typical Hyperion user comes from the Finance Department in an organization, and that the primary focus of those users is on the monthly close process, budgeting and forecasting, and internal and external statutory reporting.  Each of these processes exists within a particular timeframe, commonly referred to as the “calendar” for that process, and which will be the context for our discussion of each.  In addition, as we discuss each of these, we will also discuss the related items that should be considered when supporting users during these processes.  However, before we discuss the close process, budgeting and forecasting process, and reporting process, let’s cover the concept of calendars in the finance and accounting worlds.

Calendars

We are all familiar with Gregorian calendars where each month begins on the 1st and the number of days in each month varies as shown below:

Accounting calendars can be the same as Gregorian calendars, however, they can also differ from Gregorian calendars.  For example many companies utilize what is called a 4-4-5 calendar as a method of managing accounting periods; the 4-4-5 calendar divides a year into 4 quarters where each quarter has 13 weeks where each week starts on a Sunday and ends on a Saturday, and where the first four (4) weeks of the quarter constitute the first month of that quarter, the next four (4) weeks constitute the next month of the quarter, and the then the last five (5) weeks constitute the last month of the quarter.  This can also take the form of 5-4-4 or 4-5-4 depending on the organization’s seasonality, industry, and financial reporting requirements; however, the 4-4-5 is the most common arrangement.

The 4-4-5 accounting calendar is a common accounting structure for industries such as retail and manufacturing, and the benefits include the following:

• A consistent 13 week, 91 day quarter to measure and compare quarter over quarter financial and operating results.

• Within manufacturing companies, aligns operational forecasts and production schedules to the accounting period thereby facilitating the planning process.  This will be discussed further in the Driver Based Budgeting section below.

• Planning for Payroll becomes easier; assuming that the pay week begins on a Sunday and ends on a Saturday.

• The ability to forecast and plan in standard weekly buckets of data (if forecasting and planning is occurring at a weekly level).

• The end date of the period is always the same day of the week, which is useful for shift or manufacturing planning, and every period is the same length.

The disadvantages of the 4-4-5 accounting calendar are that month-by-month comparisons or trend over periods do not always make sense because one month is 25% larger than the other two in a particular quarter, and the 4–4–5 calendar has 364 days (7 days * 52 weeks), so that approximately every 5.6 years there will be a 53-week year, which can make year-on-year comparison difficult. However, you can still compare a period to the same period in the prior year, or use week by week data comparisons.

So, with that as a backdrop, let’s now discuss each of the finance processes and how Hyperion applications are involved in those processes.

Monthly Close

The monthly close is the processing of all transactions and journal entries, and the creation of financial statements, at the end of each fiscal month.  For accounting purposes, it is imperative that the financial statements reflect only the transactions and journal entries having relevance to the current month's revenues and expenses, and end-of-the-month assets and liability balances.  If an organization doesn’t have sufficient controls to ensure this occurs, then the dreaded re-statement is necessary.  So, to ensure that the monthly financial statements are accurate and timely, organizations will typically use standard and recurring journal entries, and close process checklists for the tasks that must be completed.

Technology’s Part

Many Enterprise Resource Planning (ERP) solutions can be used in the monthly close process, such as JD Edwards, PeopleSoft, and Oracle EBS to name just a few.  As we discussed in Part 2 of our series, Smart View and User Support, the General Ledger (GL) systems allow transactions to be tracked by account and other “segments” with related properties.   

Hyperion Financial Management

In conjunction with these ERP tools, Hyperion Financial Management (HFM) is a tool that assists in the financial close process by streamlining the consolidation, conversion, elimination and allocation processes that occur during the monthly close – many of which occur outside of the ERP solution.  As such, it is imperative that the ERP general ledger chart of accounts be “configured” to support the requirements of the consolidation tool.  As a simple example, inter-company eliminations should be targeted for specific “plug” accounts, and the consolidation tool should be “aware” of this so that eliminations occur at the correct level.

The monthly close process can take anywhere from 1-2 days for organizations that are very efficient, up to 2 weeks for an average organization, and over 3 weeks for other organizations that, let’s just say, are not so efficient.  This can be seen in the diagram below.

By allowing rapid consolidations that can be run multiple times in a day, HFM users in the finance group can get a clear picture of what the organization’s position will be on a repeated basis which allows them to begin preparing statutory filings such as the quarterly “Q”, and the annual “K”, as well as internal shareholder and management reporting.

The timing of the close process then becomes extremely important when layered with the budgeting and forecasting calendars – particularly when a monthly rolling forecast is used, as we will see.  Thus, the faster the monthly close is completed, the sooner the organization has relevant information that that will allow it to compare against budgets, provide guidance, and revise its forecasts as necessary.

The best way to improve the cycle time on the close process is to utilize technology

Close Manager

As Oracle puts it, “Hyperion Financial Close Management is built for centralized, web-based management of period-end close activities across the extended financial close cycle. The first application of its kind, it helps manage all financial close cycle tasks, including ledger and sub-ledger close, data loading and mapping, financial consolidation, account reconciliation, tax/treasury and internal and external reporting processes – any task associated with the extended financial close.”

In short, Close Manager provides a mechanism to ensure that all steps involved in the close process are completed, in the correct order, and with appropriate sign off and approval.  In addition, having a tool that provides visibility and traceability to the close process, ensures a much greater chance of SOX compliance.

View Part 2 of this Article

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